Will This Downgrade Hurt American International (AIG) Today?

Deutsche Bank downgrades American International (AIG) to 'hold' from 'buy,' citing higher costs.

NEW YORK (TheStreet) -- American International (AIG) was downgraded to "hold" from "buy" by Deutsche Bank Wednesday.

Shares of AIG fell 1.9% to $49.59 in morning trading.

The bank lowered its price target for the insurance provider to $55 from $58. The downgrade is due to the company facing high costs according to analyst Joshua Shanker.

"After making significant improvements in its core operations, elevated expenses continue to impose a ceiling on the profitability of the property and casualty business," Shanker wrote. "Management indicates that Fuji unit integration costs will keep expenses high through 2014, which suggests that core ROE may stagnate at around 6% for the foreseeable future. While we believe cash flow will ultimately exceed core and GAAP EPS, we believe incremental buyers will need to see additional combined ratio improvement to be motivated to purchase AIG stock. Hold."